A telecom nightmare: VOIP over Wi-Fi

Amid all the hoopla of the 3GSM conference in Geneva last week, most of which seemed to revolve around Microsoft getting into “push” email to compete with the BlackBerry, there were a couple of announcements that probably had telecom companies biting their fingernails (if they weren’t already, that is). One of these came from Microsoft head coach Steve Ballmer, who described how one of the features of the new Office Communicator suite would be the ability to make free VOIP calls over Wi-Fi from your cellphone (running Windows Mobile of course).

Come to think of it, Skype might be a little nervous at that idea too – not to mention the company that paid as much as $4-billion for it. But think about a carrier such as Verizon or AT&T. Their game up to this point has been selling mobile phones and services as fast as they can, in order to make up for the fact that regular old wired phone service is a moribund business. What if even a small percentage of those users (particularly the free-spending business types) could suddenly make free voice calls over Wi-Fi?

If I were a telecom player, that would certainly keep me awake at night. According to one British telecom analyst, voice revenues are set to plunge. “The premium for wireless voice, without mobility, will disappear as wi-fi networks spread,” Westhall Capital analyst Cyrus Mewawalla said. “By our estimates, that puts 75% of the market for mobile voice revenues at risk of a substantial price downgrade (in the order of 50%-80%). For some international calls, prices could fall by 90% or more.” And Nokia has made it clear it is determined to support VOIP over Wi-Fi: “Internet voice is going mobile,” said Nokia head Jorma Ollila.

The telecom companies aren’t completely powerless in all this. Nokia, Microsoft, Motorola and Research In Motion want access to their customers and networks, and they also want the carriers to subsidize their devices so that more people will buy them. That gives them leverage – but it may only allow them to slow the speed with which VOIP eats into their business, not stop it altogether.

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